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2018 (12) TMI 863
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....rore and One Lakh only) under Section 78 of the Finance Act, 1994 read with Rule 15 of the CENVAT Credit Rules, 2004. 9.4 I do not impose penalty under Section 76 of the Finance Act, 1994 on the Assesseee. 9.5 I impose penalty of Rs. 5000/- (Rupees Five Thousand Only) under Section 77 of the Finance Act, 1994." b. Order in Original No 71/SK/M-I/2013-14 dated 18/032014 "15.1 I confirm demand of Cenvat Credit of Rs. 21,31,20,807/- (Rupees Twenty One Crores Thirty One Lakhs Twenty Thousand Eight Hundred Seven Only) under Rule 14 of the CENVAT Credit Rules, 2004 read with proviso to Section 73(1) of the Finance Act, 1994. 15.2 I appropriate the amount of Rs. 21,31,20,807/- (Rupees Twenty One Crores Thirty One Lakhs Twenty Thousand Eight Hundred Seven Only) paid by the Assessee against the demand confirmed at para 15.1. 15.3 I order for recovery of Interest of Rs. 3,31,11,198/- under Rule 14 of the CENVAT Credit Rules, 2004 read Section 75 of the Finance Act, 1994. 15.4 I impose a penalty of Rs. 200/- per day during which the failure continues or @2% of such tax per month, whichever is higher, not exceeding the amount of Service tax short paid under section 76 of th....
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....nt in Rupees S No Document No Date of Reversal Amount Reversed 1 2007013852 30.06.2010 11,17,63,581 2 2007054337 31.03.2011 1,13,40,918 3 2007013850 30.06.2010 3,00,59,294 Total Excess Credit taken and reversed 15,31,63,793 4 2007049649 01.03.2011 1,55,66,509 5 2007054894 31.03.2011 3,09,69,467 6 2007049651 01.03.2011 1,34,21,038 Service Tax short paid and paid subsequently 1,63,32,785 Total 21,31,20,807 2.5 Though appellants have reversed the credit, they were not able to the explain the reasons for the said discrepancy. They also not paid interest as was required to be paid. Thus interest was computed on the basis of date of availment of excess credit as is indicated in table 3 below: Table 3: Interest to be paid Date of Amount' Rs No of Days Interest @ 13% p.a. Excess Credit/ payment Reversed/Paid 21.07.2009 30.06.2010 11,17,63,581 344 1,36,93,335 21.07.2009 31.03.2011 1,13,40,918 618 24,96,245 06.05.2010 30.06.2010 3,00,59,294 55 5,88,833 Interest on Excess Credit taken/subsequently reversed 1,....
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....2) SCC 627]} h. Since no credit is to be reversed or paid back, demand of interest is not sustainable. 3.2 In their appeal filed against the order at (ii) in para 1, supra, appellants have assailed the order of Commissioner stating a. They are not liable to pay interest amounting to Rs. 1,67,78,413/- in respect of the credit which was only availed but not utilized by them {CCE vs Bombay Dyeing and Manufacturing Co Ltd [2007 (215) ELT 3 (SC)], Bill Forge Pvt Ltd [2011-TIOL-799-HC-Kar-CX], CCE vs Dynaflex Pvt Ltd. [2011 (266) ELT 41 (Guj)], CCE vs Strategic Engineering (P) Ltd [2014-TIOL- 466-HC-Mad-CX], Sharda Energy and Minerals Limited [2013 (291) ELT 404 (t-Del)], Pearl Insulation Limited {2012 (281) ELT 192 (Kar)], Gokuldas Images (P) Ltd [2012 (278) ELT 590 (Kar)]} b. They have not availed excess credit to the extent of Rs. 3,00,59,294/- during the Financial Year 2009-10. c. They are not liable to pay interest amounting to Rs. 1,63,32,785/- for delay in making debit entries in the book of account for utilization of CENVAT Credit for payments of short paid out service tax. d. They have not short paid the service tax amounting to Rs. 1,34,21,038/-. They were lia....
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....lable in this case. iv. He stated that, in case at (i) the error was nothing but a rounding off error and should be not the reason for invoking section 78 or demanding interest. v. He also relied on the decision in case of Mangal Textuile Pvt Ltd {2014 (311) ELT 707 (T-Ahd)], Essar Steel India Ltd [2017 (345) ELT 139 (T-Del)], Suzlon Energy Ltd {2016 (39) ELT 87 (T-Ahd)] 4.3 Arguing for the revenue learned Authorized representative submitted that it is an admitted that fact that the appellant had taken excess credit and also had short paid the service tax at relevant time. It is also an admitted fact that they were not filing the ST-3 return by the due date. In fact for the years 2008-09 and 2009-10 the ST-3 return was filed only in 2010-11. He relied upon the decision of the Apex Court in case of Ind-Swift Laboratories [2011 (265) ELT 3 (SC)} and Bombay High Court in case of GL & V India Pvt Ltd [2015 (321) ELT 611 (Bom)]. In case of J K tyre & Industries Ltd [2016 (340) ELT 193 (T-LB) larger bench has chosen to follow the decision of the Bill Forge only for the reason that the unit was in the jurisdiction of that High Court. He further submitted relying on the various de....
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....ted goods or for provision of exempted services subject to the conditions and procedures specified in sub-rule (3A). Explanation-I. - If the manufacturer of goods or the provider of output service, avails any of the option under this sub-rule, he shall exercise such option for all exempted goods manufactured by him or, as the case may be, all exempted services provided by him and such option shall not be withdrawn during the remaining part of the financial year. Explanation-II. - For removal of doubts, it is hereby clarified that the credit shall not be allowed on inputs and input services used exclusively for the manufacture of exempted goods or provision of exempted service. (3A) For determination and payment of amount payable under clause (ii) of sub-rule (3), the manufacturer of goods or provider of output service shall follow the following procedure and conditions, namely:- (a) while exercising this option, the manufacturer of goods or the provider of output service shall intimate in writing to the Superintendent of Central Excise giving the following particulars; namely :- i. name, address and registration No. of the manufacturer of good....
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....y L, where J denotes the total value of exempted services provided during the financial year, K denotes the total value of dutiable goods manufactured and removed plus the total value of taxable services provided plus the total value of exempted services provided, during the financial year and L denotes total CENVAT credit taken on inputs during the financial year minus H; iii. the amount attributable to input services used in or in relation to manufacture of exempted goods or provision of exempted services = (M/N) multiplied by P, where L denotes total value of exempted services provided plus the total value of exempted goods manufactured and removed during the financial year, N denotes total value of taxable and exempted services provided, and total value of dutiable and exempted goods manufactured and removed, during the financial year and P denotes total CENVAT credit taken on input services during the financial year. (d) the manufacturer of goods or the provider of output services, shall pay an amount equal to the difference between aggregate amount determined as per condition (c) and the aggregate amount determined and paid as per condition (b), on or before....
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....so, they included the value of exempted taxable services (cancellation charges), category of taxable service. If the said ratio had been determined correctly by the appellant, the said ratio would have been 9.4%. Appellants do not dispute the error committed by them in calculating the taxable CENVAT ratio. As a result of this error, they have short reversed the amount to the tune of Rs. 1.01 crore. 7.3 Appellants do not dispute such short reversal, but have submitted that the this error has occurred for the reason of rounding of the percentage/ ratio of reversal As per the practice followed by them they were rounding off to the nearest whole number the percentage/ ratio of reversal. Thus during the Financial Year 2008-09 the percentage/ ratio determined by them was 90.4%, they rounded off the same to 90% and reversed the credit accordingly. To buttress their argument, they stated that in the year 2009-10, the said ratio was calculated as 86.5%, but rounded off by them to 87%. Thus during the year 2008-09 they after reversal availed credit of 10% of the credit taken and during the year 2009- 10, 13% of the credit taken. The said contention of the appellants has been considered by....
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....thing but a "No". 7.5 It is settled principle in law that when a statue prescribes a manner for doing a thing then it is the only correct manner and all other manners are barred. The principle has been time and again referred and explained by the Hon'ble Supreme Court. In case of Dipak Babaria Vs State of Gujarat [2014 (3) SCC 502], it was stated- "53. It is well settled that where the statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner. This proposition of law laid down in Taylor Vs. Taylor (1875) 1 Ch D 426,431 was first adopted by the Judicial Committee in Nazir Ahmed Vs. King Emperor reported in AIR 1936 PC 253 and then followed by a bench of three Judges of this Court in Rao Shiv Bahadur Singh Vs. State of Vindhya Pradesh reported in AIR 1954 SC 322. This proposition was further explained in paragraph 8 of State of U.P. Vs. Singhara Singh by a bench of three Judges reported in AIR 1964 SC 358 in the following words:- "8. The rule adopted in Taylor v. Taylor is well recognised and is founded on sound principle. Its result is that if a statute has conferred a power to do an act and has laid down th....
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....etermined the amounts to be reversed correctly and had never disclosed the manner adopted by them for determination of the amount to be reversed to the department, the appellants have suppressed and have contravened the provisions of Rule 6(3A) (c) of the CENVAT Credit Rules, 2004 with the intention to evade payment of Service Tax accordingly extended period of limitation as per the proviso t Section 73 of Finance Act, 1994 read with Rule 14 of CENVAT Credit Rules, 2004 has been rightly invoked. 7.8 The contention of the Appellants that short payment of the amount to be reversed during the year 2008-09 with excess payment made by them during the year 2009-10 to cannot be accepted, because the Rule 6(3A)(c) itself provides for determination of the amounts Financial Year wise. 8.1 From the para 1.10 of the Appeal memo, appellants have explained the availment of excess credit as follows: Table Particulars Financial Year 2008-09 2009-10 Monthly Reversal (Provisional) Ratio, 6(3A)(b) 91.25 84.0 Net Credit Availed during the Financial Year 12.51 26.01 Final Reversal/ Credit Ratio, 6(3A)(c) as on 30th June 83.86 87.0 Total Credi....
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....nature the provision of Section 11AB would apply for effecting such recovery. 17. We have very carefully read the impugned judgment and order of the High Court. The High Court proceeded by reading it down to mean that where CENVAT credit has been taken and utilized wrongly, interest should be payable from the date the CENVAT credit has been utilized wrongly for according to the High Court interest cannot be claimed simply for the reason that the CENVAT credit has been wrongly taken as such availment by itself does not create any liability of payment of excise duty. Therefore, High Court on a conjoint reading of Section 11AB of the Act and Rules 3 & 4 of the Credit Rules proceeded to hold that interest cannot be claimed from the date of wrong availment of CENVAT credit and that the interest would be payable from the date CENVAT credit is wrongly utilized. In our considered opinion, the High Court misread and misinterpreted the aforesaid Rule 14 and wrongly read it down without properly appreciating the scope and limitation thereof. A statutory provision is generally read down in order to save the said provision from being declared unconstitutional or illegal. Rule 14 specifically....
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....ne of the possible interpretations leads to such a result, howsoever attractive it may be. Thus, where there are two possible interpretations, one invalidating the law and the other upholding, the latter should be adopted. For this, the courts have been endeavouring, sometimes to give restrictive or expansive meaning keeping in view the nature of legislation, maybe beneficial, penal or fiscal etc. Cumulatively it is to subserve the object of the legislation. Old golden rule is of respecting the wisdom of legislature that they are aware of the law and would never have intended for an invalid legislation. This also keeps courts within their track and checks individual zeal of going wayward. Yet in spite of this, if the impugned legislation cannot be saved the courts shall not hesitate to strike it down. Similarly, for upholding any provision, if it could be saved by reading it down, it should be done, unless plain words are so clear to be in defiance of the Constitution. These interpretations spring out because of concern of the courts to salvage a legislation to achieve its objective and not to let it fall merely because of a possible ingenious interpretation. The words are not stat....
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....ment of CENVAT Credit, the issue of short payment of service tax and demand of interest in respect of such short payment is also involved. Appellants have in their appeal memo have admitted that they had short paid the service tax totally amounting tom Rs. 5,99,57,014/- for the periods 2008-09 and 2009-10 as detailed in table below: Table Service Tax Short paid Journal Entry No Financial Year Amount in Rupees Reasons 2007049649 dated 1.03.2011 2008-09 1,55,66,509 Service tax liability on PO Mail documents and cargo uplifted in domestic sector. The service tax liability disclosed in the ST-3 return but the debit entries were made only subsequently. 2007049651 dated 1.03.2011 2009-10 1,34,21,038 2007054894 dated 31.03.2011 2008-09 3,09,69,467 On account of wrong booking of the passenger revenue during 1.04.08 to 30.09.08. Subsequently corrected and paid ithe tax short paid in FY 2010-11 Total 5,99,57,014 It is also a fact that appellants had not filed the service tax returns during the relevant period by the due date. The service tax returns for the year 2008-09 and 2009-10 were filed only in 2010-11 (Para 1.7 and ....
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....penalties imposed on them. In respect of interest relying on various case laws referred above in their submission, supra they submitted that since they were having sufficient credit balance available with them, and they had not utilized the excess credit taken by them, no interest should be levied in respect of the excess credit availed by them. They have heavily relied upon the decision of Karnataka High Court in case of Bill Forge wherein it has been stated- "19. Rule 14 of the CENVAT Credit Rules, 2004 reads as under : Rule 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. - Where the CENVAT credit has been taken or utilized wrongly or has been erroneously refunded, the same along with interest shall be recovered from the manufacture or the provider of the output service and the provisions of sections 11A and 11AB of the Excise Act or sections 73 and 75 of the Finance Act, shall apply mutatis mutandis for effecting such recoveries. A reading of the aforesaid provisions makes it very clear that the said provision is attracted where the Cenvat Credit has been taken or utilized wrongly or has been erroneously refunded. In view of the aforesaid judgment o....
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....d wrongly. 22. In the instant case, the facts are not in dispute. The assessee had availed wrongly the Cenvat credit on capital goods. Before the credit was taken or utilized, the mistake was brought to its notice. The assessee accepted the mistake and immediately reversed the entry. Thus the assessee did not take the benefit of the wrong entry in the account books. As he had taken credit in a sum of Rs. 11,691-00, a sum of Rs. 154-00 was the interest payable from the date the duty was payable, which they promptly paid. The claim of the Revenue was, though the assessee has not taken or utilized this Cenvat credit, because they admitted the mistake, the assessee is liable to pay interest from the date the entry was made in the register showing the availment of credit. According to the Revenue, once tax is paid on input or input service or service rendered and a corresponding entry is made in the account books of the assessee, it amounts to taking the benefit of Cenvat credit. Therefore interest is payable from that date, though, in fact by such entry the Revenue is not put to any loss at all. When once the wrong entry was pointed out, being convinced, the assessee has promptly re....
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....urt has in case of GL & V India Pvt Ltd [2015 (321) ELT 611 (Bom)] distinguished the said decision of Karnataka High Court and also similar decision of Madras High Court, stating as follows: "15. In so far as the judgment of the Karnataka High Court is concerned, it appears that the said judgment is delivered by the Karnataka High Court on the facts of the said case. It would be relevant from the facts as stated in the said judgment that upon the mistake being brought to the notice of the assessee regarding the erroneous availment of the Cenvat credit, the assessee accepted the mistake and immediately reversed the entry. In the present case, the reversal of the entry is after a period of ten months. In that view of the matter, we find that even on facts, the said judgment is distinguishable. 16. In so far as the judgment passed by the Madras High Court is concerned, the Madras High Court has taken a view that mere taking of Cenvat credit facility is not at all sufficient for compelling the assessee to pay interest as well as penalty. With great respect to the Hon'ble Judges of the Madras High Court, we may say that this is not what has been held by their Lordships of the Apex....
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.... down in Ind- Swift Laboratories Ltd. (supra) that the liability for interest arises on the wrong taking independent of utilisation." 9.5 Thus we do not find any merits in the submission of the appellants in respect of the interest of excess credit availed by them. 10.1 In respect of the demand of Service Tax short paid also the claim of appellant against interest demanded is not sustainable. demand of interest is a natural consequence on account of delay in payment of the tax. Since appellants have short paid the Customs duty interest is demandable from them under Section 28AA of the Customs Act, 18962. Issue with regards to statutory levy of interest is no longer res integra. Bombay High Court has in case of Commissioner Of Central Excise vs Padmashri V.V. Patil Sahakari [2007 (215) ELT 23 Bom] has held as follows: "10. So far as interest Under Section 11AB is concerned, on reference to text of Section 11AB, it is evident that there is no discretion regarding the rate of interest. Language of Section 11AB(1) is clear. The interest has to be at the rate not below 10% and not exceeding 36% p.a. The actual rate of interest applicable from time to time by fluctuations betwee....
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....oceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute" 11.3 The said para has been considered by the Apex Court subsequently number of times and Apex Court has after considering the said decision laid down as follows in the case of Bhartiya Steel Industries vs Commissioner Sales Tax U P []: "16. Reliance has also been placed on Director of Enforcement v. M.C.T. M. Corporation Pvt. Ltd. & Others [(1996) ....
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....e no discretion is conferred upon the adjudicatory authority and where such a discretion is conferred. Whereas in the former case the principle of mens rea will be held to be imperative, in the latter, having regard to the purport and object thereof, it may not be held to be so. In Dilip N Shroff v. Joint Commissioner of Income Tax, Mumbai & Anr. [(2007) 6 SCC 329], it was opined : "86. It is of some significance that in the standard pro forma used by the assessing officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the assessing officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or he had furnished inaccurate particulars. Even before us, the learned Additional Solicitor General while placing the order of assessment laid emphasis that he had dealt with both the situations. The impugned order, therefore, suffers from non- application of mind. It was also bound to comply with the principles of natural justice. (See Malabar Industrial Co. Ltd. v. CIT) 87. We have, however, noticed hereinbefore that....
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....on 4-B, and is punishable under the aforesaid sub-section of the Act." 20. The assessing authority, therefore, understood the said provision to mean that the appellant was liable to be imposed with a punishment. The authority did not say that the duty which was otherwise due from the appellant would be realized." 11.4 In case of Vandana Art Prints Pvt Ltd. [2017 (50) STR 91 (SC)], Hon'ble Supreme Court has held as follows: "4. A neat submission that has been made by Mr. K. Radhakrishnan, learned senior counsel appearing for the appellant, is that in terms of Section 11AC of the Central Excise Act (hereinafter referred to as 'Act'), the penalty has to be equal to the duty so determined. 5. Section 11AC of the Act reads as under :- Penalty for "11AC. short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined u....
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....SC)], Apex Court further clarified its decision in case of Dharmendra Textile Processors stating as follows: "23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides. 24. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only in so far as Section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision." 11.6 Since in the present case we hold that all the ingredients for invoking extended period are available, Section 78 for imposing mandatory penalty is invokable. 11.7 Commissioner has imposed penalty under Section 76 in his order at (ii). No penalty under section 76....